The Effects of Rice Deficiency Payment Program with the Mandatory Acreage Reduction
2018
Lee, C.S., Korea University, Seoul, Republic of Korea | Yang, S.R., Korea University, Seoul, Republic of Korea
This study analyzes the effect of the rice deficiency payment program with the flexible mandatory acreage reduction on the inventory level, farm income, and policy cost. It is mandatory by regulations, but flexible in the sense that the set-aside ratio is determined each year according to the supply-demand situation. Five alternatives are simulated using the Monte Carlo method; i) the present system with both fixed and variable direct payment, ii) fixed direct payment only, ⅲ) variable direct payment only, iv) the present system with a 50,000-hectare set-aside, v) the present system with the mandatory acreage reduction. The results show that the inventory of rice reduces to a reasonable level only in the mandatory acreage reduction scenario with over 10% set-aside ratio. This supports the need of the effective and anticipatory production control. Although the acreage reduction targeting all farmers is most effective in terms of farm income and policy cost, it is more practical to apply the program to the farms with over 1.5ha considering the implementation cost. This mandatory acreage reduction program mounted on the present deficiency payment program implies a shared role of farms alongside with the government to solve the complicated problems in the rice industry.
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